This article first appeared on Morrison & Foerster Client Alerts, here.
The International Chamber of Commerce (the ICC) has hit the ground running in the new year with its 2021 Arbitration Rules (the 2021 Rules), which came into force on and apply to cases filed from 1 January 2021. The 2021 Rules mark the second update of arbitration rules by a major arbitral institution after the beginning of the COVID-19 pandemic. As covered in our previous client alert, the 2020 Arbitration Rules of the London Court of International Arbitration (the LCIA) took effect three months ago, on 1 October 2020 (the 2020 LCIA Rules).
This alert discusses the key changes introduced by the 2021 Rules and highlights points of convergence with the recent updates introduced by the 2020 LCIA Rules.
The ICC last revised its Rules in 2017 (the 2017 Rules). Therefore, as expected, the 2021 Rules do not provide a significant change of paradigm in ICC arbitration. However, the 2021 Rules contain a number of new measures aimed to address the dynamically shifting landscape and perception of international arbitration.
The 2017 Rules already had express reference to the effective management of the arbitral proceedings in Article 22(2), which prescribed that, “to ensure effective case management, the arbitral tribunal, after consulting the parties, may adopt such procedural measures as it considers appropriate” (emphasis added). The 2021 Rules have taken a step further by replacing “may” with “shall”. More than mere syntax, the new wording of Article 22(2) clarifies that arbitrators have an obligation to ensure effective case management.
The 2021 Rules confirm that consolidation can occur using mirror arbitration clauses. Under the 2012 and 2017 Rules, Article 10 stipulated that claims had to be made under the same agreement to be consolidated. This left open the question of whether multiple agreements with mirror arbitration clauses would be considered as the same arbitration agreement. Article 10 of the 2021 Rules clarifies that consolidation may take place where (i) all claims are made under the same arbitration agreement or agreements or (ii) all claims are not made under the same arbitration agreement or agreements, but the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship, and the ICC Court finds the arbitration agreements to be compatible.
This follows the approach implemented by the LCIA in the 2020 LCIA Rules. Whilst the 2014 LCIA Rules already provided for the consolidation of arbitrations, this was only where the parties had all consented to consolidation or where the arbitrations were all subject to the same arbitration agreement or between the same disputing parties. The 2020 LCIA Rules have broadened this scope, allowing arbitral tribunals to consolidate proceedings where the disputes arise under compatible arbitration agreements and relate to the same transaction or series of transactions, even if not necessarily based on the same arbitration agreement.
Under the 2017 Rules, no additional party could be joined after the confirmation or appointment of the arbitral tribunal, unless all parties, including the additional party, agreed to such joinder. The 2021 Rules include a new Article 7(5), which allows for a Request for Joinder to be made after the confirmation or appointment of any arbitrator. The 2021 Rules empower the tribunal, once constituted, to determine that Request, taking into account “all relevant circumstances”, including (i) whether the tribunal has jurisdiction over the additional party, (ii) the timing of the Request, (iii) possible conflicts of interest, and (iv) the impact of the joinder on the arbitral procedure. Article 7(5) remains subject to the additional party accepting the constitution of the tribunal already in place and agreeing to the Terms of Reference (if applicable). Importantly, any decision to join an additional party is without prejudice to the tribunal’s decision as to its jurisdiction with respect to that party. In practical terms, that may mean that additional parties will still be able to challenge the tribunal’s jurisdiction after they have been joined to the proceedings, notwithstanding that the tribunal may have prima facie determined that it has jurisdiction over the party.
The 2021 Rules also increase the value threshold for the Expedited Procedure Rules to apply (under Appendix VI and Article 30(2)) from US$2 million to US$3 million where the arbitration agreement was concluded on or after 1 January 2021. Arbitration agreements concluded on or after 1 March 2017 and up to 31 December 2020 remain subject to the US$2 million threshold under the 2017 Rules.
The 2021 Rules introduce express language on the disclosure of third party funding, a topic that has been the subject of much commentary in recent years. Article 11(7) requires the parties to promptly inform the ICC Secretariat, the arbitral tribunal, and the other parties of the existence and identity of “any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration”.
This provision is consistent with the ICC’s existing approach to conflicts of interest. The ICC’s Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration of 1 January 2019 already made it clear that the ICC Court would consider relationships between arbitrators and “any entity having a direct economic interest in the dispute” in assessing conflicts of interest. Article 11(7) is still drafted in narrower terms than the HKIAC Rules, which require the disclosure of any funding agreement, however, it remains to be seen how this works in practice.
Article 17 mandates that parties shall promptly inform the ICC Secretariat, the arbitral tribunal, and the other parties of any change in its legal representation. Following such notification, Article 17(2) allows the tribunal to exclude those new party representatives if and to the extent
needed to prevent a conflict of interest with any of the arbitrators and, therefore, to avoid a delay in the arbitral proceedings.
Where a dispute involves multiple claimants or respondents, or where an additional party has been joined to the dispute, Article 12.9 of the 2021 Rules introduces the ICC Court’s discretion, in “exceptional circumstances”, to deviate from the parties’ agreed method of constitution of the arbitral tribunal and appoint the entire tribunal to avoid “unequal treatment”. Whilst this development is clearly aimed at addressing public policy challenges to arbitral awards, it is likely to be the subject of some controversy going forward. Whilst some may welcome the rule as a further enhancement to the principle of equality of arms, others may counter that the rule hampers one of the cornerstones of arbitration, which is the parties’ right to appoint their own adjudicators.
The 2021 Rules acknowledge calls for a “greener” arbitration process when it comes to travelling and large hard copy filings. Article 26.1 provides that the arbitral tribunal may decide, after consulting with the parties and on the basis of the specific circumstances of the case in hand, that a hearing will be conducted remotely by videoconference, telephone, or other appropriate means of communication (as opposed to by physical attendance). Therefore, any hearing may be held remotely, even if one party objects to this. This formalises some of the processes that have already been necessitated in international arbitrations through 2020 as a result of the COVID-19 pandemic. Similarly to the 2020 LCIA Rules, the 2021 Rules use the broad terminology “other appropriate means of communication” to capture any forthcoming technological development that could assist future remote hearings. The advantages of such development are obvious in the context of the COVID-19 pandemic, but also address calls for arbitral proceedings going “greener”. Traditionally, in-person hearings have been synonymous with significant time flying (and resulting carbon emissions), large printing of documents likely to be shredded after the hearing, and even noteworthy use of plastic (such as plastic bottles and cups for the catering of users).
Another development towards “greener” arbitration procedures is the removal of the presumption that pleadings and written communications were to be submitted in hard copy with “copies sufficient for each party, each arbitrator, and the ICC Secretariat”. Article 3.1 of the 2021 Rules simply provides for pleadings and written communications to be “sent” to each party, arbitrator and the Secretariat without specifying the format to be adopted, therefore leaving some flexibility in approach.
Whilst not expressly provided for in the 2021 Rules, another significant change scheduled for 2021 concerns the online publication of all ICC awards and procedural orders as a default rule. Due to data privacy and confidentiality concerns, the parties to an arbitration will be provided notice in advance, with the opportunity to object or decide the modalities of publication, including anonymization.
Article 36(3) of the 2021 Rules provides that, within 30 days of receipt of the award, a party may request the arbitral tribunal to issue an additional award to rule upon claims raised during the proceedings that were left unaddressed in the original award. This brings the ICC in line with the practice of other major arbitral institutions, including the LCIA. Article 27(3) of the 2020 LCIA Rules provides that, within 28 days of receipt of the final award, a party can request the arbitral tribunal to make an additional award as to any claim, counterclaim, or cross-claim presented in the arbitration but not decided in the award.
In 2019, 212 of the 869 new cases filed with the ICC involved states or state-owned enterprises, which represents a more than 60% increase over the past five years. The 2021 Rules have acknowledged the increased participation of states in ICC arbitration and have taken steps in order to further attract arbitrations anchored in international conventions (e.g., an investor-state arbitration under a bilateral investment treaty). For instance, Article 11(7) on disclosure of third party funding equally applies to ICC treaty-based arbitrations. In the same vein, Article 13.6 introduces a neutrality requirement and confirms that no arbitrator shall have the same nationality as any party to an arbitration that arises under a treaty (unless agreed otherwise).
The revisions introduced to the 2021 Rules and the 2020 LCIA Rules have much in common, and are clearly designed to address some of the key concerns and criticisms levelled at international arbitration. Both institutions revisions are aimed at efficient case management, flexibility, and transparency in international arbitration, as well as addressing calls for “greener” arbitrations. We have set out some examples in the table below:
|ICC Rules 2021||LCIA Rules 2020|
|Case management and efficiency||Increased opt-out threshold for expedited arbitrations, now at US$3 million (Appendix VI(1)(2)).||Arbitrators empowered to limit submissions and witness statements (Article 14.6 (i) and (ii)); shorter deadlines, such as the LCIA court appointment of the tribunal within 28 days instead of 35 (Article 5.6).|
|Flexibility||Possibility of third-party joinder after the constitution of the arbitral tribunal on the condition that the third party accepts the arbitral tribunal and agrees to the Terms of Reference (Article 7(5)).||Introduction of composite requests, bringing its Rules in line with those of other leading institutions, such as the Arbitration Institute of the Stockholm Chamber of Commerce (Article 14).|
|Transparency||Disclosure of third-party funders (Article 11(7)) and prohibition of arbitrators of the same nationality as one of the parties in treaty-based arbitrations (Article 13(6)).||Tribunal secretaries prevented from undertaking decision-making functions and obliged to disclose conflicts of interest (Article 14). Sole arbitrators and chairpersons prohibited from having the same nationality as any of the parties, unless agreed in writing otherwise (Article 6.1).|
|“Green Arbitration”||Default electronic filings and express contemplation of the possibility of remote hearings.||Default electronic filings and express contemplation of the possibility of remote hearings.|
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